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welshTerrier2 t1_j7d1o7y wrote

Take a simple example.

You had $1000 in Mass taxes withheld from your pay in 2022. On your Federal return, you itemized deductions and claimed your $1000 of Mass tax as a deduction.

When you did your state return, you got a $100 refund.

The $100 is, indeed, just "getting your own money back" but you claimed $1000 and your net Mass tax was only $900.

In this example, the $100 refund would be taxable on your 2023 Federal return.

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DunkinRadio t1_j7h1fwg wrote

Small clarification: only to the extent that it allowed you to exceed the standard deduction.

Using your example, if your itemized deductions were $5 over the standard deduction, only $5 of the refund is taxable income. Also similar calculation against the SALT deduction limit.

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